Natural Gas Seen Gaining With Obama’s Fracking-Friendly Nominees

By Mark Drajem -
Mar 5, 2013

President Barack Obama says his picks to guide energy and environmental policy in his second term will lead the charge against global warming, a fight that may have one immediate beneficiary: natural gas.

“They’re going to be making sure that we’re investing in American energy, that we’re doing everything that we can to combat the threat of climate change,” Obama said at a White House ceremony yesterday.

In their current jobs, both have supported natural gas, the production of which by companies such as Exxon Mobil Corp. (XOM) and Chesapeake Energy Corp. (CHK) has boomed with the adoption of a drilling technique known as hydraulic fracturing, or fracking. Cheap gas has lessened the nation’s reliance on coal-fired power plants, reducing greenhouse-gas emissions. With more rules targeting coal’s emissions in the offing, natural gas is poised for growth, and that’s proved divisive among environmentalists.

“One of the solutions to dealing with climate is supporting natural gas,” Frank Maisano, an energy-industry lobbyist at Bracewell & Giuliani LLP in Washington, said in an interview. “This administration, while a supporter of natural gas, has sometimes been nervous about that support” because of fracking critics in the environmental community, he said.

Physics Professor

Exxon, which closed down 48 cents at $88.95 yesterday, reported 2012 revenue of $428 billion, down 0.8 percent from the previous year. Chesapeake fell 18 cents to $19.49. Its 2012 revenue was $12.3 billion, down 0.9 percent from 2011.

Moniz, 68, is a physics and engineering professor at the Massachusetts Institute of Technology in Cambridge. He served as Energy Department undersecretary from 1997 to 2001 after an earlier stint as science adviser to President Bill Clinton.

Because he combines management experience with detailed knowledge about energy technologies, Moniz is the “best possible individual Barack Obama could have chosen” for the job, John Deutch, the former director of the Central Intelligence Agency and fellow MIT professor, said in an interview. “He has a high reputation with industry and environmentalists.”

BP, Shell

Deutch said that Moniz is likely to continue current Energy Secretary Steven Chu’s historic push for clean-energy research, and will also be a stronger policy voice about climate change within the administration.

Moniz directs MIT’s Energy Initiative, which is supported by energy companies such as BP Plc (BP/), Royal Dutch Shell Plc (RDSA) and Chevron Corp. (CVX) and works on research into technologies such as biofuels, nuclear fission and building design. He has promoted natural gas as a bridge fuel -- a way to reduce carbon-dioxide emissions until cleaner sources of energy are developed.

“In the very long run, very tight carbon constraints will likely phase out natural gas power generation in favor of zero- carbon or extremely low-carbon energy sources,” Moniz said while releasing an MIT report in 2010 about natural gas. “For the next several decades, however, natural gas will play a crucial role in enabling very substantial reductions in carbon emissions.”

LNG Exports

Moniz has backed expanded overseas sales of U.S. liquefied natural gas, something backed by companies such as Sempra Energy (SRE) of San Diego and Dominion Resources Inc. (D) of Richmond, Virginia, that are seeking export licenses. LNG is a commercial enterprise that the Energy Department regulates. A report he helped direct concluded, “the U.S. should not erect barriers to natural gas imports or exports.”

Those positions endeared him to industry, while drawing criticisms from groups fighting fracking, a drilling process in which millions of gallons of water are mixed with sand and chemicals to break apart underground rock formations and free trapped gas.

“Moniz understands the vital importance of natural gas in our economy and our energy outlook,” Dave McCurdy, president of the American Gas Association in Washington, said in an interview. “The Obama administration clearly supports greater use of natural gas, and so he’ll be a good fit.”

Still, Moniz has also said that greater regulatory efforts must be taken to control the environmental risks from fracking.

Calling for greater regulation while also acknowledging the benefits of natural gas to coal puts Moniz in league with many of the largest environmental groups, including the Natural Resources Defense Council.

Fouled Water

“We think it can be” developed safely, Mark Brownstein, chief counsel for natural gas at Environmental Defense Fund, a New York-based group, said in an interview. “But the jury is out if it is at the moment.”

Critics say fracking is fouling water supplies in communities from Pennsylvania to North Dakota and replacing one fossil fuel -- coal -- with another. Even before his pick was announced by Obama yesterday, Food & Water Watch, a Washington- based environmental group, circulated a petition against Moniz’s nomination.

Thinking of natural gas as a bridge to cleaner energy is a mistake, said Michael Brune, president of the Sierra Club. “We don’t think natural gas allows for increased use of renewable energy,” Brune said in an interview. “We should use as little of it as we can.”

Alaska Senator

So far, supporting natural gas and nuclear power is a political winner for Moniz: Alaska Senator Lisa Murkowski, the top Republican on the Energy and Natural Resources Committee, cited those two positions as a reason she should be able work with him, spokesman Robert Dillon said.

In addition to Moniz and McCarthy, Obama has nominated Sally Jewell, the chief executive officer of outdoor retailer Recreational Equipment Inc., as Interior secretary. Jewell has also pushed for measures to combat climate change, and advocated for a tax on emissions that would prod companies into making better environmental decisions, and shift electricity production away from coal. Jewell will have her nomination hearing before the committee this week. Moniz and McCarthy also must be confirmed by the Senate before taking their posts.

McCarthy, 58, is a Boston native who worked for then- Massachusetts Governor Mitt Romney as an environmental adviser and later as head of the Connecticut Department of Environmental Protection. She currently leads the EPA’s Office of Air and Radiation, which during Obama’s first term issued broad regulations to cut pollution from coal-fired power plants and automobiles.

Historic Standards

“Truly historic standards have been taken under her watch,” Gene Karpinski, president of the League of Conservation Voters, told reporters yesterday. That group joined with Intel Corp. and ethanol producers to begin rallying support for her confirmation, a battle that may be tougher than that for Moniz. Girding for battle, they launched the website, http://standwithgina.com/.

She also issued the first-ever greenhouse-gas proposal for new electric power plants, rules that the agency is set to finalize this month. Under that rule, no new coal-fired power plants could be constructed without expensive carbon-capture technology, systems that companies say are not commercially available now. New natural gas plants would qualify under those rules, because gas emits about half the carbon dioxide as coal when burned for electricity.

Coal Plants

Next up are the rules existing plants, a plan that analysts say could have the largest impact on climate change of any action Obama could take on his own. Those rules could put further pressure on coal plants, even if it isn’t set at the same level.

“Clean Air Act rules are key drivers for increased natural gas demand,” said John Hanger, the former top environmental official in Pennsylvania. “The biggest problem natural gas faces now is too little demand,” and the regulations would change that, he said.

Coal mining companies and coal-heavy utilities say they hope the EPA will change course if McCarthy takes the helm.

“We hope for a more constructive working relationship with the EPA under her leadership,” Mike Duncan, president of American Coalition for Clean Coal Electricity, said in a statement. “She can put EPA on a more balanced path that recognizes America’s continued need for coal.”